Cash holding limit

What it means

The cash holding limit is the maximum amount of cash a business may keep in its cash desk at the end of the day. It is set by an internal policy, not by law: there is no general statutory limit on the cash balance for companies, so each firm sets one according to its needs and risks.

The limit is not about restricting payments but about managing risk. The more cash sits in the till, the bigger the loss in a theft and the harder it is to explain a high balance during an audit. Any excess over the limit is therefore taken to the bank, by deposit or through a cash collection service.

The cash holding limit must be distinguished from the cash payment limit, which the law sets for individual payments between parties. That limit governs how much may be paid in cash at once, while the cash holding limit governs how much money may remain in the till.

How it works in practice

Besides the limit, the cash policy names the person responsible and sets out how the cash book is kept, how cash documents are issued and how often a cash count takes place. The limit is usually derived from normal daily cash outgoings.

Where sales go through eKasa, the limit is set so that a day's takings do not stay in the till overnight. Cash taken to the bank but not yet credited to the account is recorded as cash in transit and matched against the statement.

There should be a clear procedure when the limit is exceeded: banking on the next working day, a record and the signature of the person responsible. Repeated breaches suggest that the limit is unrealistic or that someone is bypassing the rules, and both deserve management's attention.

What to watch out for

A high book balance in the cash account that does not physically exist is a classic red flag for the tax authority. It often hides unrecorded withdrawals by shareholders or missing documents, and in an audit it can lead to additional tax or the withdrawals being treated as hidden dividends.

Property insurance usually covers cash only up to a set amount and only if storage conditions, such as a safe, are met. If the balance exceeds the insured limit, a theft will be reimbursed only in part, so the cash limit should be aligned with the insurance policy.